Why we invested in Etherfuse
Etherfuse recently announced a $3M seed funding round to bring emerging market debt on-chain. The round was co-led by White Star Capital and North Island Ventures. We are proud to participate.
Co-founded by David Taylor and AJ Taylor, Etherfuse has already launched five products so far. These include tokenized sovereign debt, “Stablebonds,” issued by Mexico and Brazil. They also recently announced the creation of a new Mexican Peso-denominated stablecoin called MXNe. Currently available on Solana and Stellar, with plans for additional chains in the future, Etherfuse’s Stablebonds are yield-bearing, transferable, and composable in a DeFi environment.
While analyst reports tend to focus on the operational benefits of tokenized real world assets, such as lower costs and greater speed, they often miss a more significant opportunity: new markets. Tokenization of real world assets is not only about improving the assets themselves, but also about making markets more global and accessible to all. Tokenized US government debt, for example, has opened up an entirely new market of purchasers. Not only does this benefit the US government, but also those who previously lacked access to one of the world’s safest and most stable forms of sovereign debt, a newly available lifeline for those in inflation-ridden countries. The tokenization of emerging market sovereign debt represents a similar type of market unlock, an opportunity Etherfuse was early to spot.
With this broader thesis in mind, Etherfuse stood out to us for the following reasons:
Differentiated: Most tokenization projects involving sovereign debt have, to date, focused on US government debt. This makes sense as a logical next step following the success of stablecoins, for which the US Dollar is unrivaled in demand. We believe there will be massive value created in this opportunity area and have invested there. Meanwhile, opportunities related to emerging market sovereign debt have been largely ignored until now, despite there being attractive risk/reward profiles.
Untapped Opportunity: Yield opportunities in DeFi today range from the rock solid safe yields of US Treasuries (the 1 month US Treasury rate is currently around 5.5%) to less sustainable degen yields that sometimes exceed 30.0%. Etherfuse provides a new set opportunities. For example, the current rate for Mexico’s 28-day bond offering sits at 10.89%.
Steady: David and AJ have been particularly attentive to building a company with a strong foundation that can go the distance. They have paid close attention to relevant regulatory frameworks and to developing products that can be trusted through transparency, ease of use, and responsiveness.
Etherfuse brings a differentiated and mature approach to the massive untapped opportunity of emerging market sovereign debt. We are thrilled to support them as they open up new market opportunities.